The 2001 and 2003 Tax Cuts: A Response to Jenn and Marron

Alan J. Auerbach,
Alan Auerbach Headshot
Alan J. Auerbach Robert D. Burch Professor of Economics and Law - Economics Department, UC-Berkeley, Director - Robert D. Burch Center for Tax Policy and Public Finance
Peter R. Orszag, and
Peter R. Orszag Vice Chairman of Investment Banking, Managing Director, and Global Co-Head of Healthcare - Lazard
William G. Gale
William G. Gale The Arjay and Frances Fearing Miller Chair in Federal Economic Policy, Senior Fellow - Economic Studies, Co-Director - Urban-Brookings Tax Policy Center

September 6, 2004


In previous work, we have estimated the long-term revenue costs of the 2001 and 2003 tax cuts, assuming they are made permanent and are not gradually eroded by the Alternative Minimum Tax, to be about 2 percent of GDP, roughly the same size as the actuarial deficits over an equivalent time period in Social Security and Medicare Part A. Jenn and Marron (2004) criticize our calculation of the costs of both the tax cuts and the entitlement trust fund shortfalls. This paper responds to their criticisms and evaluates the alternative measures and concepts they propose using.